Maple Leaf Foods loss, sales disappoint

Shares fell 3.6 percent or 55 Canadian cents to C$14.95 in early trading in Toronto.

North American hog farmers have been hard-pressed to survive losses in the past year, due to at-times soaring costs of corn and wheat tied to last year’s U.S. drought, and weak pig prices. Maple Leaf and its privately held Canadian rival Olymel, each bought large corporate hog farms to secure future supplies.

“They’ve got a lot more pigs there that are losing money,” said Robert Gibson, analyst at Octagon Capital.

Maple Leaf Chief Executive Michael McCain cited hog production returns as one of the key reasons for the company’s year-over-year decline. The weak results follow a disappointing first quarter, when the company also posted a surprising loss tied to high feed costs and lower meat sales.

Net earnings for the second quarter fell to nil, or a loss of 2 Canadian cents a share, from a profit of C$26 million, or 17 Canadian cents, a year before. Sales of C$1.214 billion were down 3.7 percent.

Maple Leaf’s protein group, which includes both its meat products and agribusiness units, posted a C$9.8 million adjusted operating loss in the quarter, down from year ago adjusted operating earnings of C$33.4 million. Adjusted operating earnings are a non-IFRS (International Financial Reporting Standards) measure used by Maple Leaf.

Its bakery group was a bright spot, with adjusted operating earnings rising nearly 5 percent year over year to C$32.7 million.

Adjusted to exclude one-time costs such as restructuring, Maple Leaf, maker of Dempster’s Bread and Klik luncheon meat, reported earnings of 2 Canadian cents, down sharply from 23 cents a year earlier.

Analysts had on average expected Maple Leaf to earn 15 Canadian cents a share on sales of C$1.278 billion, according to Thomson Reuters I/B/E/S.

Toronto-based Maple Leaf is carrying out a C$560-million multi-year program to upgrade its meat operations as it seeks to boost profits and better compete with U.S. rivals.

Maple Leaf shares climbed about 15 percent as of Tuesday’s close since around mid-June, when news emerged that U.S. rival Smithfield Foods SFD.N had inquired earlier about buying the company, stoking ideas that Maple Leaf may still be a takeover target.